The rupee completed a sixth weekly decline versus the US dollar on Friday, the longest losing streak since October 2008, after a Government report showed that industrial production unexpectedly contracted in March. 

The rupee pared early gains to turn weaker against the dollar, as domestic equities continued to be under pressure for a fourth session in a row. Global risk aversion also continued to affect the sentiment for the rupee.

The rupee ended at 53.6350 per dollar after being as high as 53.39 and as low as 53.70. It had opened at 53.4950 as against the previous close of 53.4250. During the course of the week, the rupee had hit a high of 53.9050 and a low of 52.6750. It had closed at 43.4750 on May 4.

The rupee, which was down 0.3% this week has lost 5.1% this quarter.

In what was yet another shocking economic data, India's industrial production growth decelerated sharply in March, with the output shrinking as against expectations of a moderate expansion, the Government data revealed today.

The combined output of factories, mines and power utilities, as measured by the index of industrial production (IIP), contracted by 3.5% in March as against a 4.1% growth in February, the Commerce Ministry said today.

Industrial output in the financial year ended March 31, 2012 grew by 2.8% compared to an expansion of 8.2% in the fiscal year ended March 2011.

Goldman Sachs said in a note that it has been highlighting concerns about India’s deteriorating current-account deficit for some time now, and the recent flare-up in eurozone worries poses further near-term risks to the rupee.

The Wall Street titan said in a note yesterday that it is rolling forward its three-month USD/INR target of 53, given the near-term risks; its six month forecast remains at 50.7. Goldman Sachs has changed its 12-month forecast to 50 from 49. 

Goldman Sachs said it is conscious of the possibility of a sharp further deterioration in the rupee given the global and domestic macro headwinds, quick changes in risk sentiment and intervention by the RBI may make such moves short-lived.

From a medium-term perspective, as long as there is no euro area crisis, risk-reward may be more favorable for the rupee, Goldman Sachs said in its note. Growth-inflation trade-off will gradually improve, and on a REER basis, there is some valuation support for the rupee, it added.

Threat of further steps by the RBI to increase FII inflows is large, and may cap upside to USD/INR, Goldman Sachs said.

The RBI yesterday cut the amount of overseas income companies can hold in foreign currency to 50% from 100%, forcing them to convert earnings. 

On May 4, the central bank raised interest rates on non-rupee deposits by as much as 300 basis points and freed up borrowing costs on foreign-exchange loans to exporters.

Meanwhile, Asian currencies had their worst back-to-back weekly loss this year after a political impasse in Greece roiled global markets and official reports showed exports from China, Malaysia and the Philippines slowed.

The euro rose from a three-month low against the dollar on optimism that Greece’s political leaders will reach an agreement on forming a new government that will keep the country in the single-currency union.

The pound fell against the dollar, extending a second weekly decline, after an industry report showed that UK consumer confidence dropped last month as the economy slipped into a double-dip recession.